Colombia WT/TPR/S/265
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  I. ECONOMIC ENVIRONMENT 
(1) OVERVIEW  
1. Colombia's GDP grew at an average annual rate of 4.8 per cent between 2005 and 2011.  
After a period of rapid economic expansion betw een 2005 and 2007, growth slowed in 2008 and 2009 
owing to the international financia l crisis.  Nevertheless, thanks to  a combination of countercyclical 
policies and the buoyancy of some of its export pr oducts, Colombia was ab le to stave off recession 
during the crisis and growth regained momentum in 2010 to reach 4 per cent.  The estimated real GDP 
growth for 2011 is close to 6 per cent.  As a result of the acceleration in economic growth, the review period saw a significant increase in per capita GDP, which stood at US$7,236 in 2011 versus 
US$3,417 in 2005.  However, although poverty was re duced somewhat during the review period, it 
does remain high and income distribution is une ven.  Besides, although unemployment has been 
falling over this review period owing to the strong performance of the economy in recent years, the 
rate still stood at a high 9.8 per cent in 2011. 
2. In response to the international financial crisis, the Colombian authorities adopted a 
countercyclical fiscal policy designed to spur economic  growth.  It led to m oderately higher spending 
and fiscal deficit levels.  The present administration regards fiscal policy as a useful tool for 
stimulating sustainable medium-term growth a nd reducing unemployment.  At the same time, 
however, it has placed emphasis on the commitment to fiscal sustainability, which is now enshrined in 
the Constitution.  Three important fiscal policy ch anges occurred in 2011, impacting the economy as a 
whole as well as various individual sectors.  They were:  (i) the introduction of a Fiscal Rule;  (ii) the 
incorporation of the principle of fiscal sustainability  into the Constitution;  (iii) the reform of the 
system for the distribution of royalties generated by natural resources.  The Fiscal Rule is intended to 
strengthen fiscal discipline and thereby reduce th e public debt burden and facilitate the use of 
countercyclical fiscal policies.  The reform of the royalty distribution system is meant to improve the management and distribution of royalties across  the national territory.  The authorities also 
implemented a tariff reform aimed at reducing the le vels and dispersion of tariffs, as well as tackling 
the anti-export bias that is present in Colombia's tariff structure. 
3. The implementation of the countercyclical fiscal policy went hand-in-hand with an 
expansionary monetary policy that translated in to a substantial and extensive reduction in the 
intervention interest rate between end-2008 and mid-2010, amounting to 650 basis points.  Not only 
was the interest rate reduction intended to pump-p rime the economy but also to send positive signals 
to the market by guaranteeing liquidity.  In response to a modest uptick in inflation, a tight money 
policy was introduced in 2011, as borne out by the sev en increases in the intervention rate during the 
year. 
4. Colombia maintains a floating exchange rate.  During the review period and partly as a result 
of significant capital inflows to Colombia, the peso appreciated in real terms by more than 20 per 
cent, which, whilst lowering the cost of imports, made manufactures export less competitive.  The 
Banco de la República (Bank of the Republic - the cen tral bank) intervened repeatedly on the foreign 
exchange market to deal with this situation.  The Government further announced a series of measures 
in October 2010 to relieve exchange rate pressure s and cushion the impact of the revaluation and 
hence protect jobs. 
5. International trade in goods and services re presented some 36.5 per cent of GDP and 
merchandise trade 32 per cent.  Colombia's curr ent account balance traditionally shows a deficit 
stemming mainly from the deficits in the income  and services balances.  The 2011 current account WT/TPR/S/265 Trade Policy Review
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  deficit is estimated at 3 per cent of GDP.  The ba lance of trade in goods has shown a surplus for most 
of the review period.  The surplus increased mainly  as of 2008 on the back of highly dynamic exports 
in a context of rapid import growth.  Colombia ha s benefited from the improved terms of trade and 
from strong demand for commodities.  The steady expa nsion of investment flows has also played a 
significant role and reflects the increased  investor confidence in Colombia. 
(2) STRUCTURE OF THE ECONOMY , GROWTH AND EMPLOYMENT  
6. Some changes could be observed during this re view period in the sectoral make-up of the 
Colombian economy (Table I.1).  The share of th e mining sector in GDP increased substantially, 
moving from 6.3 per cent in 2005 to 10.3 per cent in 2011.  This is due in part to the increased output 
of hydrocarbons and coal as well as rising internati onal prices.  The share of the agricultural and 
manufacturing sectors contracted, indicating relative gr owth which, though solid, was below that of 
the more dynamic sectors of the economy.  The shar e of financial and real estate services in GDP 
declined only slightly despite the financial crisis , whilst that of the construction sector increased, 
driven in part by higher public spending. 
Table I.1 
Basic economic indicators, 2005-2011  
 2005 2006 2007 2008 2009a 2010a 2011a 
Gross domestic product (GDP)b        
Current GDP (billion pesos) 340,156 383, 898 431,072 480,087 504, 647 543,747 615,772 
Current GDP (US$ billion) 147  163 207 244 234 286 333 
Real GDP, growth rate (%) 4.7 6.7 6.9 3.5 1.7 4.0 5.9 
Per capita GDP (current US$)c 3,417 3,751 4,722 5,493 5,203 6,295 7,236 
By branch of economic activity  (percentage of current GDP) 
Agriculture, livestock farming, hunting, 
forestry and fishing 7.7 7.4 7.1 6.9 6.9 6.5 6.4 
Mining and quarrying 6.3 6.6 6.0 7.9 7.3 6.5 6.4 
Manufacturing industries 14.1 14.3 14.5 13.9 13.1 12.9 12.7 
Electricity, gas and water supply 4.0 3.9 3.8 3.7 3.6 3.5 3.4 
Construction 5.6 6.0 6.4 7.0 7.7 7.0 6.9 
Trade, repairs, restaurants and hotels 11.9 11.9 12.1 11.6 11.6 11.6 11.2 
Transport, storage and communications 6.8 6.9 7.1 6.6 6.6 6.4 6.2 
Financial institutions, insurance, real 
estate activities and business servi ces 19.1 18.8 18.8 18.8 19.4 19.2 18.3 
Community, social and personal service 
activities 15.9 15.4 15.2 15.0 15.7 15.8 15.0 
Total taxes 8.5 8.9 9.1 8.6 8.1 8.4 8.6 
Employment        
Total national employment (thousands of 
persons)d 18,057 17,897 18,215 17,472 18,490 19,279 20,774  
Unemployment rate (% of economically active population (EAP)), end of period
c, d 10.3 11.8 9.9 10.6 11.3 11.1 9.8 
Underemployment rate (% of EAP), end 
of period 31.4 35.9 34.3 27.1 29.8 30.5 30.3 
Memorandum items        
EAP (thousands)d 19,803 18,884 19,378 19,738 21,535 21,979 23,024 
Working-age population (thousands)d  39,190 32,744 33,305 33,867 34,423 34,961 35,491 
Total population (thousands)c, d 42,889 43,405 43,926 44,450 44,978 45,509 46,044 
a Preliminary figures. 
b Seasonally adjusted GDP series. c Data provided by the Bank of the Republic. 
d Colombian National Administrative Department of Statistics. 
Source:   National Administrative Depa rtment of Statistics;  Bank of the Republic ;  Ministry of Social Welfare;  and 
information provided by the Colombian authorities. Colombia WT/TPR/S/265
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  7. Colombia witnessed a period of accelerated growth between 2005 and 2007.  The 
international financial crisis le d to a slowdown in 2008 and 2009, though mainly in this latter year.  
Thanks to a combination of countercyclical po licies and the buoyancy of some export products, 
however, Colombia was able to avert recession dur ing the crisis.  Economic growth accelerated in 
2010 and 2011, driven by dynamic domestic demand, and in particular by investment.  Real GDP 
growth is estimated at almost 6 per cent in 20 11 as compared to the 2010 figure of 4 per cent. 
8. The main driver of economic growth during th is review period continued to be private 
domestic demand, and more specifically investment , as well as public and private consumption 
(except for 2009 in the latter case, the year of the cr isis).  In general, pub lic consumption has been 
used as a countercyclical tool to stimulate econo mic growth.  This can be seen clearly from the 
example of 2009 when government spending counteracted the impacts on GDP of a significant slowdown in private consumption and a contracti on of gross capital formation.  The rate of 
investment as a percentage of GDP expanded further during the review period, increasing from 20.2 per cent of GDP in 2005 to 24.5 per cent of GDP in 2010 and an estimated 27.1 per cent of GDP for 2011 (Table I.2). 
9. The authorities expect GDP growth over the comi ng quarters to be based largely on dynamic 
household consumption.
1  Household spending will continue to be influenced by three factors that 
have been present since 2010:  (i) a buoyant labour mark et;  (ii) low real interest rates combined with 
an ample supply of credit;  and (iii) soaring consum er confidence.  On the labour market front, the 
number of employed persons has increased and demand for work (measured by the rate of 
employment) has outstripped the supply of work (measu red by the overall rate of participation, which 
led to a fall in the unemployment rate to 9.8 per cent in December 2011, as compared to the 11.1 per 
cent recorded for the same month in 2010. 
10. Consumer credit was granted at historically low real interest rates (except for credit cards), 
and this has generated double-digit growth in th e real consumer credit portfolio (21.6 per cent 
annually for the third quarter of 2011).2  The authorities have pointed out that this trend in the real 
sector is still a recurrent feature of br okerage activities, which remain dynamic.3  Finally, household 
confidence has remained above the av erage recorded since 2001, being comparable to that of years of 
highly dynamic consumption. 
Table I.2  
Structure of GDP by expenditure, 2005-2011  
 2005 2006 2007 2008 2009a 2010a 2011a 
Percentage of constant GDP (at 2005 prices)      
Total consumption 81.7 81.4 81.5 81.4 81.4 82.2 82.1 
Household consumption 65.7 65.5 65.8 65.7 65.0 65.7 66.0 
Final government consumptionb 16.0 15.8 15.7 15.7 16.3 16.6 16.0 
Gross capital formationc 20.2 22.6 23.9 25.2 23.7 24.5 27.1 
Gross fixed capital formation 19.7 21.8 23.3 24.7 24.0 24.1 26.6 
Inventory changes 0.6 0.8 0.5 0.4 -0.3 0.4 0.5 
Total exports 16.8 17.2 17.2 17.3 16.5 16.1 16.9 
Total imports 18.8 21.1 22.5 24.0 21.5 22.8 26.2 
                                                      
1 Bank of the Republic (2011a). 
2 Although the real consumer interest rate has rema ined below its average since 1998, the levels are 
relatively high.  The average interest rate for the third quarter of 2011 was 15.2 per cent, which is equivalent to a 
real interest rate above 10 per cent. 
3 Bank of the Republic (2011b) and (2011c). WT/TPR/S/265 Trade Policy Review
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   2005 2006 2007 2008 2009a 2010a 2011a 
Real annual growth (%)        
Total consumption 4.3 6.3 7.0 3.5 1.6 5.1 5.8 
Household consumption 4.0 6.4 7.3 3.5 0.6 5.0 6.5 
Final government consumptionb 5.2 5.6 6.0 3.3 5.9 5.5 2.6 
Gross capital formationc 12.8 19.2 13.0 9.2 -4.1 7.3 17.2 
Gross fixed capital formation 13.2 18.1 14.4 9.9 -1.3 4.6 16.6 
Inventory changes -4.2 58.8 -29.0 -26.9 -172.5 -235.3 53.8 
Total exports 5.7 8.6 6.9 4.5 -2.8 1.3 11.4 
Total imports 11.9 20.0 14.0 10.5 -9.1 10.5 21.5 
a Provisional figures. 
b Final government consumption includes fina l consumption expenditure by private non-profit instituti ons that provide household  
services (IPSFH). 
c Gross fixed capital formation plus inventory changes. 
Source:  National Administrative Department of Statistics. 
11. Although the contribution of net exports to GDP continues to be negative primarily due to 
strong import growth combined with dynamic dom estic demand, itself being fuelled by an ample 
supply of credit, Colombian expor ts have grown rapidly despite the unfavourable international 
environment.  Measured in US dollars, Colombian expor ts grew at an annual rate of 43 per cent in 
2011, chiefly on the back of higher sales of mine ral-based commodities (crude petroleum and its 
derivatives, coal, ferronickel and gold), wh ich rose at an annual rate of 56 per cent.4  Imports still 
consist mainly of intermediate and capital goods, whic h represent 80 per cent of the total.  In the case 
of these two groups as in that of consumer goods , the annual growth rate for 2011 surpasses 34 per 
cent when measured in US dollars.5 
12. The review period witnessed substantial per cap ita GDP growth bound up with the growth of 
the economy and in part generated by the strengtheni ng of the peso against the US dollar.  Per capita 
GDP was US$7,236 in 2011 as against US$3,417 in 2005.  Yet despite some reduction of poverty 
during the review period, it does remain high, and in come distribution is uneven.  According to the 
World Bank, the poverty headcount ratio was 37.2 per cent in 2010, which is still a high level, albeit 
less than the 45 per cent seen in 2005.6 
13. Although unemployment has been declining duri ng the review period thanks to the sound 
performance of the economy in recent years, it is still at a relatively high level (9.8 per cent in 2011).  
This is partly because recent growth in employ ment has been skewed towards informal work, 
although the authorities point out that there has also been net job creation based on the entry of skilled 
and highly qualified people into the workforce.7  The present government's economic strategy, laid 
out the National Development Plan 2010-2014:  "Prosp erity for All", aims to step up job creation, 
reduce poverty and promote economic growth.  The economic strategy is based on a system of 
"engines" or key sectors that will drive sustainable economic growth. 
                                                      
4 Bank of the Republic (2011a). 
5 Bank of the Republic (2011a). 
6 The national poverty rate is the percentage of the population living below the national poverty line.  
National estimates are based on population-weighted subgroup estimates from household surveys. (World Bank 
online information, "Countries:  Co lombia".  Viewed at:  http://datos .bancomundial.org/pais/colombia). 
7 Bank of the Republic (2011a). Colombia WT/TPR/S/265
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  14. In May 2011, the IMF approved a new two-year arrangement for Colombia under the Flexible 
Credit Line (FCL), in an amount equivalent  to SDR 3.870 million (about US$6.220 million).8  The 
Colombian authorities stated that they intend to treat the arrangement as precautionary, and do not 
intend to draw on the line.  Colombia's first FCL arrangement was approved in May 2009 and a 
successor one-year arrangement was approved in May 2010.9  Despite the favourable short-term 
economic outlook, the authorities thought it prudent to request a new FCL arrangement, as they see 
Colombia as still exposed to downside risks, for ex ample from severe commodity price fluctuations 
and other adverse developments.  The new precau tionary agreement is therefore being seen as 
insurance against external shocks.10  In the discussions for the approval of the arrangement, the 
Executive Directors underlined Colombia's st rong economic performance underpinned by a sound 
institutional framework and skilful macroeconom ic management.  They also stressed that 
countercyclical policy support had paved the way for the recovery, that a credible inflation targeting 
regime had anchored inflation expectations, and that exchange rate flexibility had cushioned the 
impact of external shocks and large capital inflow s.  Additionally, the IMF pointed out that strong 
supervisory and regulatory oversight has underp inned the soundness of the domestic financial 
system.11 
(3) FISCAL POLICY  
15. The responsibility for formulating and managi ng the implementation of fiscal policy in 
Colombia rests with the Ministry of Finance and Public Credit, in virtue of Decree No. 246 of 2004.  During the early years of this review period, fi scal policy was geared towards achieving a primary 
surplus.  Between 2006 and 2008 the non-financia l public sector (SPNF) posted primary surpluses 
ranging between 0.2 and 0.9 per cent of GDP (Table I. 3).  Owing to the international financial crisis, 
however, this approach was abandoned in favour of a countercyclical fiscal policy designed to spur 
economic growth. 
Table I.3 
Central Government finances, 2005-2011 
(Percentage of current GDP) 
 2005 2006 2007 2008 2009 2010 2011a 
I.  Total income 13.5 14.7 15.0 15.6 15.2 13.7 16.3 
1.  Current national revenue 12.5 13.4 13.5 13.5 12.9 12.3 14.7 
Tax revenue 12.4 13.4 13.4 13.4 12.8 12.2 14.6 
DIAN Administered internal 8.6 9.1 9.2 8.9 9.1 8.4 10.1 
Revenue 5.3 5.7 5.7 5.2 5.6 4.7 6.1 
Domestic VAT 3.4 3.5 3.5 3.7 3.5 3.7 4.0 
DIAN Administered external 2.6 3.1 3.0 2.8 2.4 2.5 2.5 
Foreign VAT 1.8 2.2 2.0 2.0 1.6 1.7 1.9 
Tariff 0.8 0.9 1.0 0.9 0.8 0.8 0.7 
Tax on financial movements 0.7 0.7 0.7 0.7 0.6 0.6 0.8 
Petrol  0.3 0.3 0.3 0.3 0.3 0.3 0.3 
Democratic security 0.1 0.1 0.3 0.7 0.4 0.4 0.9 
Remainder 0.0 0.0 0.0 0.0 0.0 0.0 0.0 
Non-tax revenue 0.1 0.1 0.1 0.1 0.1 0.1 0.1 
                                                      
8 IMF, Press Release No. 11/165 of 6 May 2011.  Viewed at:  http://www.imf.org/external/ 
np/sec/pr/2011/pr11165.htm. 
9 IMF, Press Releases No. 09/161 of 11 May 2009 and No. 10/186 of 7 May 2010.  Viewed at:  
http://www.imf.org/external/np/sec/pr/2009/pr09161.htm;   and http://www.imf.org/external/np/sec/pr/2010/ 
pr10186.htm. 
10 IMF, Press Release No. 11/165 of 6 May 2011.  Viewed at:  hhttp://www.imf.org/external/np/sec/ 
pr/2011/pr11165.htm. 
11 IMF, Press Release No. 11/165 of 6 May 2011.  Viewed at:  http://www.imf .org/external/np/sec/pr/ 
2011/pr11165.htm;  and IMF (2011). WT/TPR/S/265 Trade Policy Review
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   2005 2006 2007 2008 2009 2010 2011a 
Contribution of hydrocarbons 0.0 0.0 0.0 0.0 0.0 0.0 0.0 
Remainder 0.1 0.1 0.1 0.1 0.1 0.1 0.1 
Special funds 0.1 0.2 0.1 0.2 0.2 0.2 0.2 
Other capital resources 0.8 1.1 1.3 1.9 2.0 1.2 1.4 
Total financial returns 0.2 0.3 0.2 0.2 0.1 0.1 0.1 
Financial surpluses 0.5 0.8 1.1 1.1 1.7 1.0 1.1 
Ecopetrol 0.4 0.5 0.8 0.9 1.6 0.6 0.8 
ISA and ISAGEN  0.0 0.0 0.0 0.1 0.0 0.0 0.0 
Bancóldex 0.0 0.0 0.0 0.0 0.0 0.0 0.0 
Estapúblicos 0.0 0.0 0.0 0.0 0.0 0.1 0.1 
Remaining companies 0.1 0.2 0.2 0.1 0.0 0.2 0.2 
Recovery of financial public sector portfolio (interest 
and capital repayments) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 
Refunds and unallocated funds 0.1 0.0 0.1 0.6 0.2 0.1 0.2 
II.  Total payments 17.4 17.6 17.8 17.4 18.8 17.1 15.8 
Total payments without interest 14.5 14.1 14.3 14.5 16.0 14.5 13.2 
Current national payments 16.1 16.2 15.9 15.2 16.6 15.0 14.1 
Interest 2.9 3.5 3.5 2.9 2.9 2.6 2.6 
Interest external debt 1.3 1.0 0.9 0.8 0.8 0.7 0.6 
Interest domestic debt 2.5 2.7 2.8 2.4 2.3 2.1 2.3 
Difference between issue and placement of treasury 
securities (TES) -0.9 -0.2 -0.2 -0.2 -0.2 -0.2 -0.3 
Operations 13.2 12.7 12.4 12.3 13.7 12.4 11.5 
Personal services 2.2 2.2 2.0 2.0 2.2 2.1 1.9 
Transfers  10.2 9.6 9.4 9.5 10.8 9.5 9.0 
General Revenue Sharing System (Sistema General 
de Participaciones)  4.3 4.1 3.9 3.9 4.2 4.2 3.8 
Pensions 3.4 3.4 3.5 3.5 3.5 3.1 3.2 
Other 2.5 2.1 2.0 2.2 3.1 2.2 1.9 
Overheads and other expenditure 0.8 0.9 0.9 0.8 0.7 0.8 0.6 
Military 0.2 0.3 0. 2 0.2 0.1 0.1 0.6 
Remainder 0.6 0.7 0.7 0.6 0.6 0.7 0.0 
Investment 1.3 1.4 1.9 2.2 2.2 2.1 1.7 
III.  Cash deficit or surplus -3.9  -2.9 -2.8 -1.8  -3.7 -3.4 0.5 
Net loan 0.1 0.1 0.1 0.0 0.0 0.0 0.0 
Accrued revenues 0.0 0.0 0.0 0.0 0.0 0.0 0.0 
Accrued expenditure 0.2 0.2 0.2 0.3 0.1 0.1 0.2 
Floating debt -0.2 0.2 -0.4 0.2 0.3 0.3 -1.1 
IV.  Total deficit or surplus -4.0 -3.4 -2.7 -2.3 -4.1 -3.8 1.3 
V.  Cost of the financial restructuring 0.4 0.3 0.3 0.3 0.2 0.1 0.1 
Capitaliz. of FOGAFIN interest 0.0 0.0 0.0 0.0 0.0 0.0 0.0 
Indexation of TES Law No. 546 0.0 0.0 0.0 0.0 0.0 0.0 0.0 
Indexation of Debt Reduction Securitie s (TRD) 0.0 0.0 0. 0 0.1 0.0 0.0 0.0 
Interest Law No. 546 0.0 0.0 0.0 0.0 0.0 0.0 0.0 
FOGAFIN interest 0.1 0. 1 0.0 0.0 0. 0 0.0 0.0 
Amortization TRD 0.0 0.0 0.0 0.0 0.0 0.0 0.0 
Amortization Law No. 546 0.1 0.1 0.1 0.1 0.1 0.0 0.0 
Winding up Caja Agraria 0.1 0.1 0.0 0.0 0.0 0.0 0.0 
VI.  Deficit to be financed -4.3 -3.7 -3.0 -2.6 -4.3 -3.9 1.2 
Primary balance -0.9 0.2 1.0 0.9 -1.1 -1.1 1.3 
Memorandum items        
Consolidated public sector results 0.0 -0.7 -0.6 -0.1 -2.7 -3.2 .. 
Central Government gross domestic debt b, c 28.5 26.6 25.5 24.8 26.0 27.6 32.5 
Central Government gross do mestic and external debtb, c 42.5 40.3 36.6 36.2 37.7 38.4 46.0 
Gross domestic debt, non-financial public  sector 34.4 32.4 30.7 29.3 31.3 33.4 39.5 
Net domestic debt, non-financial public sectord 22.7 20.9 19.3 18.4 21.0 22.9 28.4 
Gross external debt, non-financial public  sector 15.7 15.1 13.1 13.3 13.5 12.4 15.8 Colombia WT/TPR/S/265
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   2005 2006 2007 2008 2009 2010 2011a 
Net external debt, non-financial public sectore 12.9 11.6 9.9 12.4 12.2 11.8 15.0 
.. Not available. 
a Data for the first three quarters of 2011. 
b Since the first quarter of 2008, Ecopetrol and ISAGEN assets have not been included.   These entities were withdrawn from the 
sample at that time. 
c Adjusted internal debt.  Not includi ng indexed bonds.  In cludes floating debt. 
d The SPNF gross domestic debt less remaining SPNF debt to th e Central Government, Central Government promissory notes, 
FOGAFIN capitalization bonds held by the SPNF, bonds held by the Social Security Institute (ISS), bonds held by Ecopetrol, 
bonds held by Cajanal, bonds held by the rest of the SPNF and Carbocol bonds held by the Cent ral Government and Ecopetrol. 
e SPNF gross external debt less treasury stock, FAEP assets and assets of decentralized entities.  
Source:  Ministry of Finance and Public Credit;  and in formation provided by the Colombian authorities. 
16. The primary balance became negative between  2009 and 2010, and the central government 
deficit increased from 2.3 per cent of GDP in 2008 to  4.1 per cent in 2009.  This was the result of 
increased spending, which moved from 17.4 per cent of GDP in 2008 to 18.8 per cent in 2009, whilst 
revenue fell from 15.6 to 15 per cent of GDP. 
17. Taxes on foreign trade represented 2.5 per cent of GDP in 2010, of which 1.7 per cent was 
value added tax, and 0.8 per cent customs duties.  This represents 19.2 per cent of the value of goods 
imports in 2010, of which VAT represented 13 per cent of the overall value of goods imports and 
customs duties 6.2 per cent.  The contribution of foreign trade taxes in 2012 will be an estimated 
2.3 per cent of GDP. 
18. The present Colombian Government views the ad ministration of public finances as a crucial 
contributing factor in the pursuit of macroeconomi c stability.  Therefore, without disregarding the 
commitment to fiscal sustainability, fiscal policy is  deemed to be a useful instrument for spurring 
sustainable medium-term growth and reducing unemployment.  Consequently, some of the fiscal 
targets proposed in 2010 and in the 2011 Financ ial Plan were revised, mainly to support 
employment-generating sectors with linkages to othe r production sectors.  The new administration has 
implemented a fiscal policy for the period 2010-2014  as part of a series of reforms designed on the 
one hand to guarantee fiscal sustainability throu gh macroeconomic stability and job creation, and on 
the other, to stimulate growth in the economy and bolster productivity.12 
19. Four important fiscal policy changes occurred in 2011, impacting the economy as a whole as 
well as various individual sectors:  (i ) the introduction of a Fiscal Rule;  (ii) the incorporation of the 
principle of fiscal sustainability into the Constitu tion;  (iii) the reform of the system by which 
royalties generated by natural resources are distribu ted;  and (iv) the implementation of a tariff 
reform. 
20. In June 2011 the Congress approved the Fiscal Rule, a quantitative rule governing Central 
Government finances aimed at enhanced fiscal disci pline to reduce the public debt and pave the way 
for the use of countercyclical fiscal policies, ma inly through the improved management of royalties.13  
Amongst the main features of the Fiscal Rule are:   (i) it determines a policy of fiscal consolidation 
designed to reduce the central govern ment's structural deficit to 2.3 per cent of GDP in 2014 and to 
                                                      
12 Ministry of Finance and Public Credit (2010). 
13 The Fiscal Rule contains supplementary rules on limits to the growth of spending, considering that 
structural spending must be consistent with the evolution of structural revenue.  Furthermore, the Investment 
Plan of the National Development Plan, the Medium Term Spending Framework and the General Budget of the 
Nation must be compatible with the fiscal rule. WT/TPR/S/265 Trade Policy Review
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  1.5 per cent of GDP in 2015, and to hold it below 1 per cent as of 2022;  (ii) it allows for fiscal 
expansion (countercyclical policy) when the expected  GDP growth rate is at least two percentage 
points below the long-term growth rate (also in  cases of emergency or major shocks affecting 
macroeconomic stability);  and (iii) it creates a Macroeconomic Stability Fund for managing the 
savings generated by the application of the Rule;  this Fund must guarantee the resources necessary to 
implement a countercyclical policy if need be.14  It is hoped that the Fiscal Rule will help to 
consolidate the adjustment process carried out over th e past decade and serve to anchor expectations 
regarding the country's fiscal sustainability. 
21. The fiscal policy framework was buttressed by amendments to the Constitution in June and 
July of 2011.  Legislative Act No. 3 of 1 J une 2011 amended the Constitution to introduce the 
principle of fiscal sustainability.15  Legislative Act No. 5 of 18 July 2011 amended the Constitution 
and created the General System of Royalties.16  The second constitutional amendment aims to revamp 
the royalty distribution system so that the resour ces can be distributed throughout the entire country 
on the basis of social, regional and inter-generational equity, with priority being given to the country's poorest regions (Box I.1). 
22. The amount of funds entering the General System of Royalties was an estimated 
US$7.500 million for 2010, which is expected  to reach some US$12.000 million by 2020. 
                                                      
14 Under the Fiscal Rule, in periods of marked economic downturn, the government will be able to 
implement countercyclical sp ending in order to stabilize the economy an d avoid major spikes in unemployment 
and poverty. 
15 This Legislative Act enshrines the duty of all branch es and organs of governmen t to ensure that their 
decisions are in keeping with fiscal sustainability, in that way achieving the aims of the Social State Guided by 
the Rule of Law.  The text may be viewed a t:  http://wsp.presidencia. gov.co/Normativa/Leyes/ 
Documents/ActLeg0301072011.pdf. 
16 The text may be viewed at:  http://wsp.presidencia.gov.co/Normativa/ActoLeg/Documents/ 
ActLeg0518072011.pdf. Colombia WT/TPR/S/265
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  Box I.1:  The General System of Royalties  
Legislative Act No. 5 of 18 July 2011 amended the Constitution to create the General System of Royalties, 
intended to ensure the more equitable and rational distribution of royalties. 
Revenue accruing to the General System of Royalties will go towards:  the funding of social, economic and 
environmental development projects in the territorial units, savings for their pension liabilities, investment in 
education, science, technology and innovation, the generation of public savings, the monitoring of the exploration and exploitation of mineral deposits and the surveying and geological mapping of the subsoil, and 
boosting the overall competitiveness of the economy so as to improve social conditions for the population.  
Departments, municipalities and districts in whose te rritory non-renewable natural resources are being 
exploited, as well as municipalities and districts with s ea and river ports used to transport those resources or 
products derived from them, are entitled to a share of the royalties. 
Various funds were created in pursuit of the aims and objectives of the General System of Royalties, namely 
the Science, Technology and Innovation Fund, the Regional Development Fund, the Regional Compensation 
Fund, and the Savings and Stabilization Fund. 
The revenues accruing to the General System of Royalties will be distributed as follows: 
 - 10 per cent for the Science, Technology and Innovation Fund; 
 - 10 per cent for territorial pension savings;  and  - up to 30 per cent for the Savings and Stabilization Fund. 
The remainder will be distributed as follows:  20 per cent for direct allocations and 80 per cent for the 
Regional Compensation Fund and the Regional Development Fund (of this latter percentage, 60 per cent will go to the first fund and 40 per cent to the second). 
 - In addition, 2 per cent of the revenues of the General System of Royalties will be allocated 
for the monitoring of the exploration and exploitation of mineral deposits, and the surveying and geological mapping of the subsoil.  Th is percentage will be deducted proportionally 
from the total abovementioned amounts to be distributed from revenues of General System 
of Royalties.  The deductions will be determined by the Ministry of Mines and Energy or an entity appointed by it. 
 - Any difference between the total revenues of the General System of Royalties and the 
abovementioned allocations will go to the Savings and Stabilization Fund. 
The Regional Compensation Fund will finance development projects that will impact the country's poorest 
territorial units at the regional or local level.  The duration of the Regional Compensation Fund will be 
30 years as from the effective date of the law.  At the end of that period, those funds will go to the Regional 
Development Fund.  The Savings and Stabilization Fund and the returns on its resources will be managed by 
the Bank of the Republic. 
The Savings and Stabilization Fund will serve to smooth out fluctuations in the value of royalties and thereby 
reduce the income volatility of beneficiaries.  In other words, it will generate savings in times of increased 
revenues, which will then serve to stabilize spending wh en there are less royalties.  Through this Fund, the 
royalties would therefore play a significant role in fi nancing territorial pension savings.  This would help 
cover the pension liabilities of local authorities, which were estimated by the Ministry of Finance and Public 
Credit at 82.4 trillion pesos (some US$45 million) at the end of 2009, and for which provisions currently 
stand at 30 per cent, by official estimates. 
The General System of Royalties will have its own budget system, and its funds will not be part of the 
General National Budget. 
Source:  WTO Secretariat.  WT/TPR/S/265 Trade Policy Review
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  23. One important element of the fiscal reform is th e reform of the tariff system introduced at the 
end of 2010, which lowered the average tariff from 12.2 per cent to 8.2 per cent (Chapter III)(2)(iv)).  
The authorities stated that the aim of the tariff refo rm is to overcome many of the problems associated 
with the tariff structure that are affecting competiti veness and exports.  The view is that prior to the 
changes introduced in 2011, Colombia 's tariff structure had a distorting effect and displayed a high 
degree of dispersion.  This gave rise to an aver age tariff higher than that of other countries in 
Latin America and an anti-export bias as well as ne gative effective protection in the case of some 
industries, which had to be partly off set by means of export promotion schemes.17  The authorities 
deemed it necessary to undertake a tariff reform in  the light of the regulatory changes introduced by 
Decision No. 669 of the Andean Community, which te mporarily restored tariff-setting autonomy to 
Member Countries.  The upshot was tariff dispersion amongst the countries that negatively impacted the competitiveness of Colombia's production sector on account of the tariff reductions instituted by 
other countries such as Peru and Ecuador. 
24. In this context, the Government undertook a st ructural reform that entailed reducing the 
nominal tariff in force per subheading by as much as ten percentage points at the most.  The reform is 
intended to modernize the tariff scheme to enhance its  simplicity, efficiency and transparency and to 
boost competitiveness and thereby generate positive spin -offs in the form of job creation, economic 
growth and improved well-being for the population.
18  The tariffs on raw materials and capital goods 
were reduced to 5 and 10 per cent respectively,  depending on whether they correspond to the 
industrial or agricultural sector (WTO definition) ;  the tariff on consumer goods was lowered to 
15 per cent.  The tariff reductions did not include some agricultural products regarded as sensitive in 
terms of production and employment, amongst which were  corn (maize), rice, meat, milk and barley, 
though the tariffs on other products such as sugar, co tton and wheat were reduced by five percentage 
points.  The tariff cuts of April 2011 were followed by fresh cuts in August that temporarily lowered 
the tariffs on capital goods and inputs not produc ed in Colombia from 5 per cent to 0 per cent, 
bringing the average tariff down to 6.2 per cent (Chapter III)(2)(iv)). 
25.  In the light of the tariff reductions the Gove rnment reviewed its fiscal targets.  It was 
announced in September 2011 that the 2011 Financial Plan submitted to Congress in June would be 
revised, and a new 2011 target set for the central government deficit - 4.1 per cent of GDP - which was higher than that announced in June by almost 0.2 per cent of GDP.  The projected deficit would result from a greater imbalance between revenue ( 14.4 per cent of GDP) and expenditure (18.5 per 
cent of GDP) due in particular to an increase in i nvestment spending as a result of the injection of 
additional funds to shore up the five strategic sect ors of mining, housing, infrastructure, agriculture 
and technological innovation.  The estimated deficits  were 1 per cent of GDP in the primary balance, 
3.4 per cent of GDP for the non-financial public sect or, and 3.2 per cent for the consolidated public 
sector deficit.
19  The authorities report that 2011 results were better than projected, with a central 
government deficit of 2.9 per cent of GDP and a cons olidated public sector deficit of 2.2 per cent of 
GDP. 
26. The 2012 Financial Plan was formulated on th e basis of the Legislative Act on Fiscal 
Sustainability, the General System of Royalties and the adoption of the Fiscal Rule.  Bearing in mind 
the positive effects expected from these reforms,  the Financial Plan foresees a reduction in the 
consolidated public sector deficit between 2011 and 2012 from 2.2 to 1.8 per cent of GDP.  That 
                                                      
17 Ministry of Finance and Public Credit (2010). 
18 It is also hoped that the increased imports resulting from the tariff cuts will increase demand for 
dollars, which will have the effect of devaluing the curr ency, thereby counteracting the uptrend in the exchange 
rate that has been obse rved in recen t quarters. 
19 Information provided by the authorities;  and Ministry of Finance and Public Credit (2010). Colombia WT/TPR/S/265
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  result would be consistent with a primary surplus in the non-financial public sector of 1.2 per cent of 
GDP.  It is anticipated that the Central Governme nt deficit will be 2.8 per cent of GDP in 2012, 
including additional spending to deal with the extr eme winter weather in 2011.  As regards deficit 
financing, it is expected that government borrowing  will be reduced and replaced with privatisations.  
The authorities expect funds worth almost 0.6 per cent of GDP to accrue to the government in 2011 
from the reduction of its stake in the Empresa de Petróleos de Colombia, Ecopetrol (Colombia Oil 
Company).20  Similarly, net non-financial public sector de bt is expected to the decline in 2012. 
27. As a percentage of GDP, the non-financial public sector debt diminished slightly between 
2006 and 2011, despite the costs deriving from capita l injections into the banking system during the 
financial crisis and the deterioration of the fiscal situation as of 2008 (Table I.3).  This was partly 
caused by the devaluation of the external debt induced  by the appreciation of the peso.  Indeed, the net 
debt of the non-financial public sector declined  from 47.5 per cent of GDP at the end of 2006 to 
34.7 per cent of GDP at the end of 2010 and estimates are that it closed 2011 at 32.4 per cent. 
(4)  MONETARY AND EXCHANGE RATE POLICY  
28. The Bank of the Republic is the body responsible  for formulating and implementing monetary 
and exchange rate policies.  The management and execution of the tasks of the Bank of the Republic 
are undertaken by its Board of Directors, which comprises seven members including the Minister of Finance and Public Credit, who chairs it.  The Ba nk of the Republic also acts as Government banker, 
fiscal agent and trustee.
21 
29. The primary aim of monetary policy is to achie ve and maintain low, stable inflation and 
ensure growth of the national produc t consistent with its long-term tr end.  To carry out its mandate, 
the Board of Directors of the Bank of the Repub lic sets quantitative inflation targets based on the 
annual variation in the consumer price index (CPI) produced by the National Administrative 
Department of Statistics (DANE). 
30. Monetary policy decisions are based on an analys is of the current state and outlook of the 
economy and an evaluation of inflation forecasts vis-à-vis  the targets.  If the evaluation suggests that 
under the current monetary policy conditions inflat ion will deviate from the target over the policy 
timeline and that the deviation will not be the resu lt of temporary shocks, the Board will modify it its 
policy position.22  In this regard, the Bank of the Repub lic implements monetary policy by changing 
the intervention interest rates (monetary policy and open market operations) at which it injects 
liquidity into the economy or mops up excess liquidity.23  These intervention rates are the main 
instruments of monetary policy and through them, th e Bank influences market interest rates.  Another 
                                                      
20 Ministry of Finance and Public Credit, Press Rel ease No. 63 of 20 December 2011.  Viewed at:  
http://www.minhacienda.gov.co/portal/page/portal/M inHacienda/elministerio/prensa/Comunicados/COMUNIC
ADO%20DE%20PRENSA%2063%20PLAN%20FINANCIERO%202012f.pdf. 
21 Bank of the Republic online information.  " Funciones ".  Viewed at:  http://banrep.gov.co/ 
the_bank/funct.htm. 
22 Bank of the Republic (2011a). 
23 The main monetary policy intervention mechanism used by the Bank of the Republic to influence the 
amount of money in circulation and economy is the alteration of the minimum interest rate charged to financial 
entities for loans to them, or of the maximum interest rate paid to receive excess money from them.  These 
operations are also known as open market operations, and take place over very short terms (1, 7 and 14 days).  
The loans are granted in sessions known as "expansion auctions" and the surplus funds are received in sessions 
called "contraction auctions".  The minimum rate for 1- day expansion auctions is called the monetary policy 
intervention rate of the Bank of the Republic .  There is also a maximum expansion rate. WT/TPR/S/265 Trade Policy Review
Page 12 
  
  significant monetary instrument is the buying and selling of foreign currency on the foreign exchange 
market. 
31. Both an annual inflation target  and a long-term inflation target are set, ranging between 2 and 
4 per cent.  For 2012, the Board of Directors of the Bank of the Republic agreed that this year's 
inflation target would be the same as the long-term target (i.e. ranging between 2 and 4 per cent), with 
3 per cent as the ad hoc target for legal purposes.  In its decision, the Board took the view that the 
economic situation was such that inflation would fall within the long-term range going forward, and 
that this was helping to anchor in flation expectations at that level.24 
32. In response to the global financial crisis, the Bank of the Republic maintained a highly 
expansionary monetary policy, involving a substa ntial and extensive reduction in the intervention 
interest rate between the end of 2008 and in mid-2010.  The rate was cut by 650 basis points from 
9.5 per cent in December 2008 to 3 per cent in May 2010.  This level was maintained until 
December 2010.  The authorities have pointed out that the interest rate cuts were intended not just to 
pump-prime a slowing economy, but also to send positive signals to the market by guaranteeing liquidity, and that the cuts were possible because inflation was continuing to fall owing to diminished 
inflationary pressures and the international financial crisis.
25 
33. In the early months of 2011 the Board of Directors of the Bank of the Republic decided that 
given the recovery in domestic demand, the go od credit indicators and inflation expectations 
consistent with the dynamism of the economy, the monetary stimulus should be gradually reduced.  
Besides, this was thought to be particularly timel y considering that inflation had accelerated beyond 
the midpoint of the target band.  Hence, between February and December 2011 there were 
seven increases in the intervention rate totalling 175 basis points (Table I.4). 
34. After a period of relatively high inflation be tween 2006 and 2008, price increases slowed 
substantially in 2009 as a result of slower gr owth in domestic demand and falling raw materials 
prices.  Inflation remained low in 2010 despite the ma intenance of an expansionary monetary policy.  
In 2011, the consumer price index (CPI) posted a furt her annual rise of 3.73 per cent, which was more 
than anticipated and largely attributable to rising fo od prices.  Despite some acceleration, the rise in 
the CPI remained within the infla tion target band of 2 to 4 per cent.  As seen above, the authorities 
responded to the uptick in inflation by tightening the monetary policy through repeated increases in 
the monetary policy intervention rate in 2011. 
                                                      
24 Bank of the Republic online information.  " Politica monetaria ".  Viewed at:  
http://banrep.gov.co/monetary_policy/index.html. 
25 Ministry of Finance and Public Credit (2011), Chapter 2:  Balance Macroeconómico 2010 y 
Perspectivas para 2011 . Colombia WT/TPR/S/265
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  Table I.4 
Main monetary indicators, 2005-2011  
 2005 2006 2007 2008 2009 2010 2011 
Monetary aggregates        
Monetary base (billion pesos, end of the pe riod) 22,804 27,032 32,415 37,040 39,545 44,875 51,339 
M1 (variation over 12 months) 17.8 18.2 11.9 8.2 7.5 17.7 10.8 
M3 (variation over 12 months) 16.0 17.0 18.1 17.8 7.1 11.4 18.1 
Interest rates        
Bank of the Republic mone tary policy intervention 
rate (%)b 6.0 7.5 9.5 9.5 3.5 3.0 5.75a 
Intervention rate for open market operations 
(maximum expansion rate) 7.0 8.5 10.5 10.5 4.5 4.0 5.75 
Term deposit certificates (CDTs), total, 90 days 7.0 6.2 7.9 9.6 6.1 3.6  4.17c 
One-day inter-bank interest rate (De cember)  5.5 7.5 9.3 8.8 3.0 3.0 4.8 
Inflation (variation over 12 months)d        
Consumer Price Indexe 4.9 4.5 5.7 7.7 2.0 3.2 3.7 
Producer Price Indexf 2.1 5.5 1.3 9.0 -2.2 4.4 5.2 
Exchange rates        
Representative market rate (annual average:  
pesos/US$) 2,321 2,358 2,078 1,966 2,156 1,898 1,848 
Exchange rate variation (December-Decemberg -4.4 -2.0 -10.0 11.4 -8.9 -6.4 1.5 
Real exchange rate index (total trade, December) (increase = depreciation) (1994=100)
h 104.0 104.7 97.0 98.2 90.3 81.9 81.4 
a End of November 2011. b Bank of the Republic interv ention rates, end of period. 
c 2011 average. 
d Data from the National Administrative Department of Statistics (DANE). e Between October 2006 and September 2007, a survey of income  and expenditure was conducted in the framework of the 
Gran Encuesta Integrada de Hogares  (Major Integrated Household Survey) covering 42,733 households in the country's 
24 principal cities.  It was thus possible to  identify changes in the consumption hab its and spending patterns of the Colombian  
population.  On the basis of the findings of the survey, a new CPI calculation method was develope d by an interdisciplinary tea m 
of specialists, with the advice of the sta tistics entity of Canada, and has been in use since January 2009.  A new two-tier bas ket 
was created with a fixed and a flexible le vel, making it possible to update the basket of goods and services to reflect changes  in 
final consumption.  Besides expanding the basket, the new CPI-08 expanded  its geographical coverage to 24 cities. 
f Since December 2006 the DANE has been re sponsible for calculating the producer price index (PPI).  It includes goods produced  
and consumed domestically as well as imported goods. 
g A minus quantity indicates appreciat ion, a positive quantity, depreciation. 
h ITCRIPC (T):  real exchange rate index, uses the CPI as de flator and total weightings.  Total weightings correspond to the 
moving share of each country in Colombia's foreign tr ade (imports and exports) with its 20 main partners. 
Source:  Bank of the Republic of Colombia;  and Colombian National Administrative De partment of St atistics (DANE). 
35. Colombia has maintained a floating exchange  rate system since 1999.  The Bank of the 
Republic intervenes in the foreign exchange market in  order to:  (i) maintain an adequate level of 
international reserves for reducing the economy's vulne rability to external shocks in both the current 
and capital accounts;  (ii) limit excessive short-te rm exchange rate volatility;  and (iii) regulate 
excessive appreciation or depreciation that may jeopar dize the attainment of future inflation targets 
and the external and financial stability of the economy.26 
36. The Bank of the Republic may intervene in th e foreign exchange market to head off 
fluctuations, in the following ways:  (i) intervention through automatic auctions to buy or sell foreign 
exchange options whenever the exchange rate deviates by more than 5 per cent from the moving 
average for the previous 20 business days;  (ii) inte rvention at its discretion through auctions for the 
sale (purchase) of foreign exchange options, in orde r to increase (reduce) international reserves;  (iii) 
discretionary intervention through direct purchase s or sales of foreign exchange on the foreign 
                                                      
26 Bank of the Republic online information, " Politica cambiaria ".  Viewed at:  
http://banrep.gov.co/exchange_policy/index.html. WT/TPR/S/265 Trade Policy Review
Page 14 
  
  exchange market;  and (iv) intervention through competitive auctions for the purchase of dollars on 
the foreign exchange market.  Foreign exchange ma rket interventions are done in a manner consistent 
with the inflation target.  Thus for example, no foreign exchange purchases are made when the Bank 
of the Republic is raising its intervention rates, nor are there sales when those rates are being lowered.  
If the projected inflation is below the target, fo reign exchange is bought in order to increase the 
money supply and attenuate any appr eciation;  if on the other hand projected inflation is above the 
target, the Bank of the Republic must sell foreig n exchange on the market to reduce the money 
supply.27 
37. During the review period and owing in part to  significant capital inflows to Colombia, the 
peso appreciated in real terms by more than 20 per cent.  That real appreciation made imports cheaper 
but rendered Colombia's exports less competitive,  more particularly exports of manufactures. 
38. Considering that during the first half of 2010 Co lombia's nominal and real revaluation was the 
most pronounced in the region, the Bank of the Repub lic intervened in the currency market to make 
direct purchases through auctions, worth US$400 milli on per month between Ma rch and June.  Those 
purchases were resumed in September and conti nued until mid-June 2011, so that between 
March 2010 and May 2011 the Bank of the Republic  had made purchases to the tune of some 
US$5.080 million.28 
39. Moreover, in October 2010 the Government announced a series of measures to relieve 
exchange rate pressures and thereby diminish the im pact of the revaluation and protect jobs.  Those 
measures were:  (i) the decision not to monetize US$1.500 million in assets, of the amount projected 
for 2010;  (ii) the modification of the 2011 Financial Plan so as to balance external funding sources 
with debt service, which meant a US$384 million reduction in the assets monetized by the Central Government in 2011;  (iii) the implementati on by the Ministry of Finance of the strategy of 
foreign currency hedging for external debt service  payments, of up to US$3.700 million;  (iv) the 
opening by the Ministry of Agriculture, through FINAGRO, of a facility of up to Col$50 billion to support currency hedging by export-oriented agri cultural sectors (Chapter IV(2));  and (v) the 
elimination of the exemption from income tax on inte rest payments on credit contracted with foreign 
entities. 
(5) B
ALANCE OF PAYMENTS  
40. Colombia's current account balance has traditiona lly shown a deficit, owing mainly to the 
large income balance deficit, which partly re flects remittances abroad for royalties and other 
payments related to the mining and energy sector.  It  also reflects the customary deficit in the services 
balance.  There was a substantial increase in the current account deficit coinciding with the period of 
economic growth from 2006 to 2008.  Thereafter, it declined to 2.1 per cent of GDP in 2009 as a result of the international financial crisis, which slowed down Colombia's GDP growth and depressed 
imports.  The current account balance deteriorated  further in 2010 when economic growth again 
accelerated, bringing the deficit to 3.1 per cent of GDP for that year (Table I.5).  The 2011 current 
account deficit is estimated at 3.0 per cent of GDP. 
                                                      
27 Bank of the Republic online information, " Politica cambiaria ".  Viewed at:  
http://banrep.gov.co/exchange_policy/index.html. 
28 Ministry of Finance and Public Credit (2011), Chapter 2:  Balance Macroeconómico 2010 y 
Perspectivas para 2011 . Colombia WT/TPR/S/265
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  Table I.5  
Balance of payments, 2005-2011a 
(US$ million) 
 2005b 2006b 2007b 2008b 2009b 2010b 2011b 
Current account -1,886 -2,988 -5,978  -6,699 -4,960 -8,760 -9,980 
A.  Goods  1,595 323 -584 971 2,545 2,240 5,514 
General trade  1,387 -45 -707 775 2,053 2,038 5,487 
Exports  20,818 23,930 29,381 37,095 32,563 39,546 56,216 
Imports f.o.b. 19,431 23,975 30,088 36,320 30,510 37,508 50,728 
Special foreign trade operations  208 368 122 196 493 202 27 
Exports  911 1.251 1.195 1.439 1.462 1.322 1.524 
Imports  703 883 1.073 1.243 969 1.120 1.497 
B.  Services  -2,102 -2,118 -2,647 -3,072 -2,821 -3,623 -4,621 
Exports  2,668 3,377 3,636 4,137 4,202 4,446 4,907 
Imports  4,770 5,495 6,283 7,210 7,023 8,070 9,528 
C.  Factor income -5,461 -5,935 -7,962 -10,110 -9,298 -11,851 -15,820 
Income  1,070 1,519 1,895 1,925 1,479 1,444 2,284 
Interest  872 1,121 1,423 1,218 568 447 533 
Profits and dividends  166 359 441 665 877 963 1,714 
Employee remuneration  32 38 30 42 35 34 34 
Expenditure  6,531 7,454 9,857 12,035 10,777 13,296 18,104 
Interest  2,927 2,820 3,160 3,284 3,079 3,376 3,763 
Profits and dividends  3,585 4,615 6,667 8,721 7,666 9,879 14,302 
Employee remuneration  19 19 29 29 33 40 39 
D.  Current transfers  4,082 4,743  5,216 5,512 4, 613 4,475  4,948 
Income  4,342 5,037 5,642 5,898 5,253 5,343 5,673 
Workers' remittances 3,314 3,890  4,493 4,842 4, 145 4,023  4,168 
Other transfers 1,029 1,147 1,149 1,056 1,107 1,319 1,505 
Expenditure  260 294 426 386 640 868 726 
Capital and financial account 3,236 2,890 10,347 9,515 6,254 11,770 13,322 
A.  Financial account  3,236 2,890 10,347 9,515 6,254 11,770 13,322 
Long-term financial flows  4,367 7, 183 11,466 9,960 12,598 6,733 12,673 
Assets  4,659 1,097 912 2,253 3,079 6,560 8,288 
Colombian investment abroad  4,662 1,098 913 2,254 3,088 6,562 8,289 
Direct  4,662 1,098 913 2,254 3,088 6,562 8,289 
Portfolio  0 0 0 0 0 0 0 
Loans  -2 0 0 0 0 0 0 
Trade credit  0 0 0 0 0 0 0 
Other assets  -1 -1 -1 -1 -9 -2 -1 
Liabilities  9,074 8, 328 12,398 12, 214 15,686 13, 301 20,979 
Foreign investment in Colombia  10,085 7,113 9,436 10,425 11,959 7,813 18,537 
Direct  10,252 6,656 9,049 10,620 7,137 6,899 13,234 
Portfolio  -167 457 387 -195 4,822 913 5,303 
Loans  -1,165 1,248 2,736 1,336 1,781 5,486 2,015 
Trade credit  49 -88 116 182 242 -13 -108 
Financial leasing  105 55 110 272 727 16 535 
Other liabilities  0 0 0 0 976 0 0 
Other long-term financial movement s  -48 -47 -20 -1 -8 -8 -18 
Short-term financial flows -1,131 -4 ,293 -1,120 -445 -6,345 5,038 648 
Assets  1,823 4,019 3,186 -83 4,518 1,567 5,388 
Liabilities  692 -274  2,066 -528 -1, 826 6,604  6,036 
Errors and omissions 378 120 328 -193 54 126 402 
Variation in gross international 
reserves  (balance-of-payments 
methodology)  1,729 23 4,698 2,623 1,347 3,136 3,744 
Balance of gross international reservesc  14,957 15,440 20,955 24,041 25,365 28,464 32,303 
Balance of net international reserves c 14,947 15,436 20,949 24,030 25,356 28,452 32,300 
Variation in net international reserves 
(balance-of-payments methodology)  1,723 27 4,696 2,618 1,349 3,133 3,754 
Memorandum items        
Current account (as percentage of GDP) -1.3 -1.8 -2.9 -2.7 -2.1 -3.1 -3.0 WT/TPR/S/265 Trade Policy Review
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   2005b 2006b 2007b 2008b 2009b 2010b 2011b 
Net external debt, non-financial public 
sector (as percentage of GDP, December) 12.9 11.6 9.9 12.4 12.2 11.8 15.0d 
a In accordance with the methodology set out in the Fifth Edition of the IMF Balance of Payments Manual . 
b Preliminary data. c Includes contributions by the Bank of the Republic to the Latin American Reserve Fund (FLAR) and cash balances under 
international agreements (ALADI). 
d First three quarters of 2011. 
Source:  Bank of the Republic, Estudios Económicos  [Economic Studies]. 
41. The goods trade balance has shown a surplus for mo st of the review period.  That surplus has 
been growing, though mainly since 2008.  It peak ed in 2009 largely because imports fell more sharply 
than exports.  The favourable trade balance has re mained high in 2010 and 2011, above all given the 
dynamic performance of exports (Table I.5).  Th e balance of services has shown a deficit throughout 
the review period, reflecting a large deficit in th e transport and business and construction services, as 
well as financial services accounts (Table I.6). 
42. Outflows for profits and dividends abroad have more than doubled during the review period.  
They surpassed US$14.000 million in 2011 to become the second largest source of foreign currency 
outflows after goods imports.  Given the significant increase in recent years, this item is now three 
times as large as interest payments on the external  debt, which amounted to US$3.763 million in 2011 
(Table I.5).  At over US $4.100 million in 2011, workers' remittances from abroad are still one of the 
main sources of current account revenue. 
43. Once again there were substantial direct inv estment flows during the review period despite 
considerable fluctuations from year to year.  Th e flow was particularly strong in 2007 and 2008, It 
declined during the 2009-2010 financial cr isis and rose again in 2011 (see below). 
44. During the review period, the share of the ex ternal debt in GDP continued to contract 
significantly, partly owing to the real appreciation of the peso.  The net external debt of the non-financial public sector therefore represented 11.8 per cent of GDP in 2010 and is estimated at 
11.2 per cent of GDP for 2011.  Total external debt is estimated at 21.6 per cent of GDP for 2011.
29 
45. At the end of September 2011, net international reserves stood at roughly US$32.300 million, 
or the equivalent of some 8 m onths of goods and services imports. 
(6) TRADE AND INVESTMENT FLOWS  
(i) Developments in the trade in goods30 
46. Foreign trade recorded highly dynamic growth  during this review period.  Expressed in 
United States dollars, imports grew at an averag e annual rate of almost 17.1 per cent between 2005 
and 2011 and exports at an average annual rate of  17.9 per cent, and both practically doubled in 
US dollar terms over the period.  Total 2011 impor ts and exports amounted to US $54.675 million and 
US$56.954 million respectively (Tables AI.1 and AI.2). 
                                                      
29 Ministry of Finance and Public Credit (2011), Chapter 2:  Balance Macroeconómico 2010 y 
Perspectivas para 2011 . 
30 Data in this section are from the Commodity  Trade Statistics Database (Comtrade) of the 
United Nations Statistics Division. Colombia WT/TPR/S/265
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  (a) Breakdown of trade in goods 
47. Mining products represented some 65 per cent of  Colombian exports in 2011 (Table AI.1 and 
Chart I.1).  Crude oil and coal made up the bulk of mining exports.  The share of the agricultural 
sector has contracted further, although agricultu ral products still make up just over one fifth of 
exports.  The main agricultural exports  are coffee, flowers and bananas. 
48. The manufacturing sector accounted for 17.5 per cent of exports in 2011, which was 
considerably below the 34.7 per cen t recorded in 2005 (Table AI.1).   Chemicals are still the main 
manufacture exported by Colombia. 
49. Manufactures accounted for almost 80 per cent Colombia's imports for 2011 (Table AI.2).  
The main categories of imported manufactures are mach inery and transport equipment and chemicals.  
Agricultural imports made up 10.5 pe r cent of total imports in 2011. 
(b) Direction of the trade in goods 
50. Colombia's trade continues to be relatively concentrated geographically and is still highly 
dependent on developments in th e North American market.  The United States is still the main source 
of imports, with 25 per cent of the total in 2011 (Table AI.3).  Next in line are China, the 
European Union and Mexico.  The China's share h as increased substantially since the last review. 
51. The United States is the main destination for exports and accounts for 38.5 per cent of the 
total for 2011 (Table AI.4 and Chart I.2).  It is followed by the European Union with almost 15.6 per 
cent and the Andean Community countries with 7 per cent. 
 
 
  WT/TPR/S/265 Trade Policy Review
Page 18 
  
  Chart I.1
Trade in goods by product, 2005 and 2011
2005 2011
(a)    Ex ports (f.o.b. )
Total: US$21,190  million
(b)    Im ports (c.i.f.)
Manufactures
Total: US$21,204 million Total: US$54,675 millon 
Source: Comtrade database of the United Nations Statistics Division and data provided by the Colombian 
authorities.Total: US$56,954 millionFuels
39.2%Other agric.
products
4.5%Other manuf.
14.4%
Machinery
6.0%Other
3.0%
Agric.
products
Chem.
products
20.8%Oth. mining
2.6%Fuels
2,6%Food
products
8.7%
Agric.
prod.
ManufacturesMiningAgric.
prod..
MiningFood 
products
17.2%
Manuf.Manuf.
Chemical
8.4%
Other
mining
1.3%Other semi-
manuf.
5.9%Food 
products
10.0%
Fuels
64.1%Other agric.
products
2.3%
Other 
mining
1.2%Chemical
5.8%Other semi-
manuf.
3.1%Machinery
3.0%Other 
manuf.
5.5%Other
4.9%
Agric.
prod.
Other agric.
products
1.6%
Other semi-
manuf.
6.5%Machinery
40.4%Other manuf.
15.5%Food
products
9.3%Other agric.
products
1.2%
Fuels
7.0%
Oth.
mining
1.8%
Chemical
16.8%
Other semi-
manuf.
6.4%Machinery
40.7%Other manuf.
15.7%MiningMining
Other
1.2%Other
1.1%
 Colombia WT/TPR/S/265
 Page 19 
 
 
  Chart I.2
Trade in goods by trading partner, 2005 and 2011
2005 2011
(a)    Exports (f.o.b.)
Total: US$21,190 million
(b)    Im ports (c.i.f.)
Total: US$21,204 million Total: US$54,675 million
Source: Comtrade database of the United Nations Satistics Division and data provided by the Colombian 
authorites.Total: US$56,954 million Chile
1.4%Other
3.5%
United States
41.8%
Ecuador
3.4%Other America
26.8%Other 
Europe
Mexico
8.3%China
1.1%Other Asia
1.6%
AmericaUnited States
38.5%Japan
1.6%
EU(27)
13.4%
Other America
21.7%China
3.5%Japan
0.9%
Other Europe
2.9%Other 
Asia
2.8%Other
3.3%
EuropeAsia
AmericaEuropeAsia
United States
28.5%
Argentina
1.9%Other America
18.1%EU(27)
13.8%Other Europe
1.2%Japan
3.3%
China
7.6%Other Asia
7.1%Other
3.5%
United States
25.0%
Argentina
3.4%Brazil
5.0%
Other America
13.3%EU(27)
13.7%Other Europe
1.2%Mexico
11.1%China
15.0%Other Asia
7.5%Other
2.3%
AmericaAmericaEurope
EuropeAsia
AsiaEU(27)
15.6%
Ecuador
6.3%
Japan
2.6%Chile
3.9%
Brazil
6.5%Panama
3.4%Panama
1.2%
 WT/TPR/S/265 Trade Policy Review
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  (ii) Trade in services 
52. Colombia has traditionally shown a trade-in-services deficit stemming from the large deficit 
in the transport and business and c onstruction services, and to a lesser extent the financial services 
deficit (Table I.6).  The transport services deficit again accelerated during this review period owing to 
the expansion in the goods trade.  The travel bala nce also continued to show a deficit between 2006 
and 2011, as did the average balance of communicati ons, data and information technology, except in 
the year 2007.  Trade in services fared better than  trade in goods during the 2008-2010 international 
financial crisis.  Income increased further, wh ilst expenditure contracted, though only in 2009. 
Table I.6  
Trade in services, 2005-2011 
(US$ million) 
 2005a 2006a 2007a 2008a 2009a 2010a 2011a 
Services balance -2,102 -2,118 -2,647 -3,072 -2,821 -3,623 -4,621 
Total income 2,668 3,377 3,636 4,137 4,202 4,446 4,907 
Transport  780 899 1,104 1,239 1,136 1,207 1,378 
Travel  1,222 1,554 1,669 1,844 1,999 2,083 2,201 
Communications, data and 
information technology  238 287 291 302 317 277 334 
Insurance and finance 31 59 68 70 48 45 55 
Business and construction 272 445 372 528 546 603 722 
Other services  125 133 132 154 157 230 238 
Total expenditure 4,770 5,495 6,283 7,210 7,023 8,070 9,528 
Transport  2,107 2,253 2,623 3,008 2,329 2,823 3,094 
Travel  1,130 1,332 1,537 1,739 1,752 1,826 2,238 
Communications, data and 
information technology  270 342 273 320 388 361 442 
Insurance and finance 435 480 541 580 558 700 868 
Business and construction 600 836 994 1,178 1,599 1,798 2,290 
Other services 228 253 315 383 398 561 596 
a  Preliminary data. 
Source:  Bank of the Republic, Estudios Económicos . 
(iii) Foreign direct investment 
53. Net annual foreign direct investment flows fluc tuated considerably during the period of this 
review.  They surpassed US$10.000 million in 2005, 2008 and 2011 and posted their lowest level in 
2006.  The effect of the international financial cris is was to reduce flows in 2009 and 2010, but 2011 
brought a renewed upturn. 
54. For this review period, the oil and mining sect ors were the main recipients of foreign 
investment, representing 6 and 23.3 per cent of total foreign direct investment respectively for the 
period (Table I.7).  The other sectors receiving foreign direct investment included manufacturing 
(18.4 per cent of the total), largely on account  of acquisitions of national enterprises by 
multinationals, as well as commerce, restaurants and hot els (9.3 per cent), the financial sector (8.5 per 
cent), and transport and storage and communications (7.3 per cent). Colombia WT/TPR/S/265
 Page 21 
 
 
  Table I.7  
Net foreign direct investment by economic sector, 2005-2011 
(US$ million) 
 2005a 2006a 2007a 2008a 2009a 2010a 2011a 
Total 10,252 6,656 9,049 10,620 7,137 6,899 13,234 
Petroleum sector 1,125 1,995 3,333 3,428 2,428 2,781 5,083 
Agriculture, forestry, hunting and 
fishing 6 8 40 41 28 67 131 
Mining and quarrying (includes coal) 2,157  1,783 1,100 1,798 3,025 1,755 2,621 
Manufacturing 5,513 803 1,867 1,748 621 656 533 
Electricity, gas and water -251 -141 -79 156 -977 36 585 
Construction 146 156 210 380 262 298 454 
Commerce, restaurants and hotels 305 523 803 1,049 594 370 2,264 
Transport, storage and 
communications 1,021 1,061 414 853 348 -425 1,421 
Financial institutions 246 464  1,319 1,095 720 1,252 343 
Community services -16 4 40 72 88 110 -201 
a  Preliminary data. 
Source:  Bank of the Republic. 
55. The European Union is still the main source of foreign direct investment in Colombia, 
accounting for some 29 per cent of the total from 2005 to 2011 (Table I.8).  The United States is also 
a major source of investment, with some 25.2 per cen t in total, followed by Panama with 11.2 per 
cent. 
Table I.8  
Net foreign direct investment by country of origin, 2005-2011a 
(US$ million) 
 2005b 2006b 2007b 2008b 2009b 2010b 2011b 
European Union 4,727 699 -319 801 152 137 1,829 
Germany 11 2 4 52 -100 -27 25 
Austria 2 1 1 10 31 24 21 
Belgium 1 1 2 3 3 0 6 
Cyprus 0 0 0 1 5 8 2 
Spain 599 492 289 564 -327 44 733 
Finland 0 0 0 0 0 0 0 
France 18 4 139 70 113 48 46 
United Kingdom 0 0 0 0 0 0 0 
Greece 0 0 0 8 3 3 0 
Holland 319 25 -818 -130 -109 -158 810 
Hungary 0 0 0 0 0 0 0 
England 3,747 17 35 200 386 194 390 
Ireland 14 38 4 2 2 7 1 
Italy 2 9 11 11 11 18 15 
Lithuania 0 0 0 0 0 0 0 
Luxembourg 0 109 11 2 100 -30 34 
Netherlands 0 0 0 0 0 0 0 
Portugal 2 0 1 3 2 2 1 
Sweden 1 0 1 0 32 3 -255 
Denmark 9 0 0 5 0 3 -1 
Scotland 0 0 0 0 0 0 0 
Panama 208 240 477 760 337 426 650 
Anguilla 0 0 1,195 1,111 790 257 184 
Bermuda 222 8 12 31 287 -31 9 
Canada 2 18 8 52 78 163 174 
Bolivarian Republic of Venezuela  16 59 34 1 51 42 20 
Cayman Islands 31 159 131 0 23 34 -1 
Barbados 0 0 0 4 5 19 61 
United States 1,410 1,524 1,064 1,215 1,198 401 507 
Costa Rica 3 4 2 10 21 10 7 WT/TPR/S/265 Trade Policy Review
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   2005b 2006b 2007b 2008b 2009b 2010b 2011b 
Aruba 3 0 16 1 2 9 0 
Chile 6 2 46 45 54 20 583 
Mexico 1,063 31 340 412 -647 -624 80 
MERCOSUR 47 32 549 141 75 74 341 
Other European countries 38 17 43 57 67 48 109 
Andean Community 15 6 10 18 18 17 39 
Other 347 375 136 231 87 29 -173 
Subtotal (new investment less 
repayments of capital) 8,140 3,174 3,745 4,891 2,598 1,033 4,419 
Reinvestment of profits c 988 1,487 1,971 2,301 2,111 3,086 3,732 
Petroleum sector 1,125 1,995 3,333 3,428 2,428 2,781 5,083 
Total 10,252 6,656 9,049 10,620 7,137 6,899 13,234 
a Not including capital inflows arising from reinvestment of pr ofits and investments in the oil sector, as the breakdown per co untry 
is not available. 
b Preliminary data. 
c Not including the oil sector. 
Note: A negative flow means that capital repayments exceed new investments. 
Source:   Bank of the Republic, Economic Studies.